Reply to: How much do you put in your pension?

[Fred Bloggs]

Is the maximum you can put in each year dictated by the salary you pay yourself, or can you put 40k in regardless? Thanks

See above.

[Hobosapien]

My understanding is it's 40k for company directors. For pure employees it's limited by salary, to stop companies and employees avoiding NI by using salary sacrifice beyond salary limits.

So for company contributions to a SIPP it's 40k. Can also contribute more by taking advantage of previous 2 years allowance if not already maxed out.

[second income trader]

Is the maximum you can put in each year dictated by the salary you pay yourself, or can you put 40k in regardless? Thanks

IMO, pension contributions are simply too good to pass by on. Put as much as you can into your SIPP and when you reach the £1 million limit, as many younger workers will, then stop contributing. With MyCo contributions you're avoiding ER's NICs @ 13.8%, EE's NICs @ 2% and income tax @ 40%. That is a very good deal in my book.

[jmo21]

Is there a minuimum investment in Vanguard Lifestrategy? Reading on their site it says Anyone know of another platform to invest through to access this fund?

Hargreaves have them, their minimum buy is £100.

[dingdong]

The point is it is extremely difficult for an actively managed fund to beat passive funds over time. Even if you are lucky enough to pick one that has beaten the index over the past few years the chances of them continuing to do so are extremely small (and the chance of you being able to predict which active manager will outperform the market is also small so moving between active managers also doesn't work).

Research in 2015 in the US comparing active funds over a decade showed...

89% failed to beat the global equity benchmark.
71% failed to beat the UK equity benchmark.
85% failed to beat the emerging markets equity benchmark.
94% failed to beat the US equity benchmark.


You can invest in a vanguard lifestrategy fund on interactive investor (interactive investor: low cost online trading & investment platform) with no minimum investment. Over time the low vanguard fees (0.24%) compared to typical 1% fees from an active fund will also have a dramatic difference on the end results.

[Fred Bloggs]

Just a suggestion, but before anyone jumps in and buys one of these low cost tracker type vehicles. Compare the last five years of the tracker to Fundsmith. Then please explain why you would have bought the tracker fund over Fundsmith.

[doconline]

Hargreaves is good place to start.

Once you have over £40k (can't remember the exact figure but its easy enough to calculate) you're better off moving to a fixed fee provider like interactive investor that doesn't charge any platform percentage fees (they have a fixed fee of around £120 a year instead).

And the easiest option is to go with a Vanguard Lifestrategy fund where you get a low cost, diversified fund with ongoing automatic asset rebalancing so you can just forget about it and get on with your life rather than constantly tinkering with your investments.

Is there a minuimum investment in Vanguard Lifestrategy? Reading on their site it says

The minimum investment for anyone who invests with us directly is £100,000 per fund. However, if an investment is made through a platform (a fund supermarket who sells our products along-side other providers), the minimum investment is determined by the platform.

Anyone know of another platform to invest through to access this fund?

[ChimpMaster]

Try to cash out and all you'll be paying down is a massive amount of super tax.

MVL / ER if rules stay the same. No more contracting for me after that.

[Cirrus]

Plan B

I'm looking to semi-retire within the next couple of years so will cash-out then and quickly pay down the BTL loans I have.

Try to cash out and all you'll be paying down is a massive amount of super tax.

[Hobosapien]

They have all the bases covered, I think.

Dismal savings rates, taxes if you withdraw the cash for other purposes, likely rule changes further down the line after encouraging a particular path of savings/investments by making it temporarily more attractive. Though these days that only requires a fraction of a percent to get the turd polishers chasing the 'best' investments.

May as well conform and prop up the economy by blowing it all on tat. Empty all the banks and see what they do then.

[ChimpMaster]

FSCS limit isn't the only thing to consider/worry about. There's also the potential bail-in next time the banks need rescuing, as seen in Cyprus a few years ago. Easier for them to do now those with positive bank balances are treated as bank creditors rather than customers, so would join the normal creditor priority queue when a company goes bust.

Depends how big the next bank crash is and how political it gets as far as what the government are willing to do to rescue them, but for other reasons too it makes less sense to have one massive pot of cash earning below real inflation interest year on year.

So pension contributions and other ways of spreading the risk for medium/long term investment are worth serious investigation.

Yes this all worries me, now that pretty much most of my life savings are in the Ltd Co account. I don't trust pension contributions either because they have to be invested into the Ponzi scheme that is the global financial system now.

I'm looking to semi-retire within the next couple of years so will cash-out then and quickly pay down the BTL loans I have. This will at least ensure that my cash is 'used up' to pay off real assets and isn't just sitting in a bank account as a virtual number waiting to be raped by the government.

[Hobosapien]

FSCS limit isn't the only thing to consider/worry about. There's also the potential bail-in next time the banks need rescuing, as seen in Cyprus a few years ago. Easier for them to do now those with positive bank balances are treated as bank creditors rather than customers, so would join the normal creditor priority queue when a company goes bust.

Depends how big the next bank crash is and how political it gets as far as what the government are willing to do to rescue them, but for other reasons too it makes less sense to have one massive pot of cash earning below real inflation interest year on year.

So pension contributions and other ways of spreading the risk for medium/long term investment are worth serious investigation.

[lionheart79]

If you mean "saved" in a bank, that's really not true, you are only guaranteed up to 75 K, within one banking group.

Actually this does raise another question I had - for those of you that have saved up reasonable war chests >75K, do you open accounts with other banks just to get around the compensation limit? Surely it must be more of a worry the bigger the balance gets over and above that FSCS limit, though of course if we get to the point that a major bank fails who knows what sort of economic predicament the wider world will be in...

[lionheart79]

I wish the newbies would get that.

I know you're constantly banging this drum Northernlad but when you are 'only' paying your accountant the equivalent of 60-90 minutes of your own chargeable time each month, it is easy to feel like you're taking the p*ss if you keep hitting them with demands. IT Security isn't that much higher up the professional food chain than accountancy... if at all!

Of course for the really important issues or when wanting to be sure one stays on the right side of tax regulation and law it is right to defer to your accountant, but otherwise there is no harm in asking [non-binding] warm-up questions from community folks first?!

[psychocandy]

Been there, done that, got the (poor performance) t-shirt.

Its tempting but I try to leave them alone a bit.

H-L do their top 100 or whatever so I try to stick with them.